Reducing The State Budget Burden, Two Local Governments Are Preparing To Issue Bonds

Deputy Minister of Finance Suahasil Nazara. (Photo: By courtesy)

JAKARTA - The government, through the Ministry of Finance, stated that it is preparing a regulatory scheme that allows regional governments (pemda) to issue municipal bonds.

Deputy Finance Minister Suahasil Nazara said the discourse had developed over the past 10 years. This bond issuance option is becoming more realistic amidst the burden of the state budget in supporting the national economy.

However, he cannot confirm when the strategic plan will be released, considering that there are a number of technical provisions that must be finalized with various parties.

"What is clear is that we hope that there will be one or two provinces that can immediately execute the municipal bonds," he said virtually, Tuesday, March 2.

Suahasil added, the issuance of these debt securities can be done by local governments at the provincial and district / city levels as long as they meet the applicable criteria.

Furthermore, the second person in the Ministry of Finance after Sri Mulyani explained that the issuance of debt securities by the regional government is actually needed by regions that are categorized as poor in order to improve the economic level of the region.

"But ironically, the regional interest in releasing municipal bonds only comes from the regional government with the title as a rich region," he said.

In addition, he also revealed another factor, namely the richer region is considered to have more capability to access the financial market compared to regions that are included in the poor region.

"This is also a challenge to solve. Not to mention that the market also only welcomes municipal bonds with a low risk profile, such as those from rich areas. If you don't believe it, you can ask Pak Inarno (President Director of the Indonesia Stock Exchange), "he explained.

For information, the government continues to work hard in fulfilling the adequacy of the State Budget (APBN) amidst the economic downturn as a result of the COVID-19 pandemic.

Most recently, the Ministry of Finance informed that it has succeeded in issuing Government Securities (SUN) in two foreign currencies, namely the US dollar and the Euro.

Minister of Finance (Menkeu) Sri Mulyani said that from the two financing instruments, each raised US $ 4.2 billion for a 10-year tenor, US $ 1.25 billion for 30 years, and US $ 500 million for 50 years.

Meanwhile, the Euro denomination is 1 billion Euros for a tenor of 12 years. If added together, the total SUN distributed by the government reached IDR105.3 trillion (USD exchange rate IDR14,100 and Euro exchange rate IDR17,142).

"The great thing is that all the series of publications this time have recorded records with the lowest interest rates in history," he said in a virtual press conference of our State Budget, Tuesday, February 23.

Meanwhile, these funds are mostly used to support the 2021 State Budget, mainly in financing the national economic recovery (PEN) and the national vaccination program.